Legal insurance and property

Frankly, we are always surprised that the market for insurance in the legal sector is not as mature as in other areas of life and business.

Stepping aside from property and residential tenancies for a moment, most of us now have myriad insurance policies for the most important things, whether life cover, home insurance, medical insurance and so on. Yet, when it comes to legal risk, the legal expenses insurance market is still yet to take off.

One area where the market is a little more mature relates to residential lettings, and this is no surprise. The risks to landlords who rent out residential properties are enormous, and in our view the law is ridiculously slanted in favour of tenants in the UK.

Here is s a common scenario – you allow tenants into your property on a 6 month assured shorthold tenancy. You decide that you want your property back at the end of the tenancy. Most would agree that, with a short term contract, of a fixed duration, it’s fair enough, as long as you give the tenants notice, that they should leave as agreed at the end of the tenancy, with all rent paid.

However, what often happens is the landlord serves notice 2 months before the end of the tenancy. The tenants then stop paying rent. Bad enough you may think. Then, the tenants don’t leave. Under the current english legal system what the landlord then has to do is issue a possession claim under the frankly ridiculously titled “accelerated possession procedure”. This accelerated procedure will generally take 2 months, during which the tenants continue not to pay. Sop now the landlord is 4 months rent out of pocket.

Landlord then obtains the possession order. The tenants still don’t leave and still don’t pay. Next step ? The landlord has to arrange for court bailiffs to attend ti evict the tenant. A further court fee is payable and depending on the bailiff workload at the relevant county court, another month may pass. So, after a 6 month agreed tenancy, you are now, as a landlord, out of pocket for 5 months rent and the occupation has lasted for 9 months or more.

No wonder tenant default insurance is popular and we think any landlord that doesn’t have it is taking an enormous risk.